CHAPTER ONE

INTRODUCTION

1.1. Background of the Study

Every organizations weather business or non-business, public, private or non-governmental are
established to achieve certain goals and objectives. To carry out their activities and achieve their
goals and objectives, they should have human, material, machinery, technology and financial
resources. Among these resources, the human resource is the most basic and important asset. This
is due to the fact that human resource mobilizes and organizes the other resources which list the
above to recognize the organizational goals and objectives. Then, in any organization, employees
are considered the essential strategic asset. Therefore, employees could be a competitive advantage
if their organization provides more attention and invest in developing employees’ skills at the
workplace (Danish & Usman, 2010; Zaharie &Osoian, 2013).

Over the past decades researchers have shown growing interest in HRM practices (Jiang, Lepak,
Hu, & Baer, 2012). The main goal has been to investigate how organizations can maximize
performance (Combs, Liu, Hall, & Ketchen, 2006). Jiang et al,. (2012) argues that by
implementing practices such as training and development, selection methods, incentive rewards,
empowerment and participation, employees’ knowledge and motivation are likely to increase.
Human resource is one of the most valuable resources that make a difference in an organization’s
performance. Because of that, organizations are demanded to manage the HR well for organization
survival. For any organization to be successful there should be effective human resource
management practice that allow employee to effectively and efficiently contribute to the
realization of objective of an organization. Studies have also shown that, organizations increased
and sustain competitive advantage via the management of scarce and valuable human resources
(Khan, 2010).With this understanding, today’s organizations are committed to invest a large share
of their resources to build its HRM practice more than ever before.

All organization must operate with and through people. People are the most important input as
well as asset for any organization. Public organizations in particular are judged on the basis of
the performance of their human resources. HR is for organization’s a greatest asset, because
without having sufficient HR, the organization will be incapable to achieve established goals and
objectives; hence a good managing HR is the key role of an organization for success. This
demonstrates that the employees and the potential they possess are key important resource of the
organizations success. The quality of organizations employees, their interest and satisfaction with
their jobs and their sense of fair treatment all have significant effect on the firm’s productivity,
level of customer service, reputation and survival. In short, people make the difference in a
competitive business environment. Because HR is critical in every component of the organization,
managing HR effectively is the responsibility of every manger in practical area. Public
organizations in particular are judged on the basis of the performance of their human resources.
According to Ingraham and Kneedler (2000) underlined that government activities are typically
highly personnel intensive. And thus, HRM practices are central to improving the quality of
services offered by the governments.

HRM practice can be defined as a set of organizational activities that aims at managing a pool of
human capital and ensuring that this capital is employed towards the achievement of organizational
objectives (Wright & Boswell, 2002). HRM is the critical management area that is responsible for
an organization’s most important asset, its people. Therefore, managers are expected to perform
different managerial activities. From those the most one is HRM practice. When organizations are
practicing HRM effectively the organization competency will increase through employee
performance. According to Armstrong (2014) defined HRM as a strategic and coherent approach
to the management of an organization’s the most valued assets; then, the people working in the
organization individually and collectively contribute to the achievement of its objectives, but the
way an organization manages people can influence its performance.

This study focuses on the effects that progressive HRM practices have on improvement
of employee organizational performance. HRM practices considered in this study are: Human
Resource Planning, recruitment and selection, training and development, performance appraisal
and compensation practice.